Tuesday, 17 June 2014

WHICHEVER country has the cheapest energy will get
the best jobs and at the moment that is the United States as a result of its
shale oil and gas revolution.

This has slashed energy bills, will help make the US
energy independent, and has created one million new jobs with a further two
million expected.

In a recent World Energy Outlook, the International
Energy Agency warned that Europe could lose a third of its global share of
exports from energy intensive industries because of price disparities between
it and the US.

This is particularly relevant to the North East,
which is the only net exporter in the UK, with many of these goods made by the
energy-intensive process industries on Teesside.

But many of these companies – representing 30% of
the region's industrial base – face energy price rises of up to 30% by 2020 and
50% by 2030, as a result of the UK’s green policies.

There are also concerns over the security of the
UK’s energy supplies with businesses facing potential blackouts as early as
this winter, due to the loss of significant quantities of baseload, fossil fuel
power in place of intermittent renewables.

Steve Holliday, the chief executive of the National
Grid, last week warned the UK will have to tailor its energy use to the
weather.

Speaking to the Daily Telegraph he said that
historically, energy users had "expectations that the supply will always
be there" to meet maximum demand.

But "with renewables in the world in which we
are moving towards" this would no longer be the case as it would make more
sense to shift energy demand to times when the wind blows or the sun shines.

"We have to get used to a world in which when
power is cheap we use it, when power is expensive we find a way of not using
it," he said.

This seems like a backward step in an advanced
economy and is one of the reasons why we need to get on fracking for shale gas.
The Royal Society, British Geological Survey, WaterUK and Public Health England
all says it’s safe.

Gas has 50% fewer carbon emissions than coal and can
act as a low carbon bridge to a less carbon intensive future, alongside nuclear
power, energy from waste and renewables, in particular solar.

Last month two close environmental and liberal
allies of President Obama, former senators Tim Wirth and Tom Daschle, called
for the whole treaty framework of mandatory emissions limits to be scrapped in
favour of a greater focus on energy innovation and adaption.

This makes sense. We have to find a way to replace
dirty energy technologies with cleaner ones, and develop low carbon
technologies that can broadly scale without the need of costly subsidies.

We will have to eventually wean ourselves off fossil
fuels but the top down policies we currently have are out of date.

They were drafted when we thought we had reached
peak oil, but that has now been overtaken by the shale revolution and we need
to enter a new era of climate pragmatism.

Wednesday, 16 April 2014

SIEMENS became the first offshore wind turbine manufacturer
to confirm it plans to set up a base in the UK when it announced it was establishing a blade
manufacturing base in Hull, creating 1,000 jobs.

In recent years four of the world’s other main turbine players
have signalled their intent to establish factories at UK ports, however none have
yet committed, with the length of leases required said to be a major
drawback.

Industry insiders say that many of the turbine
companies want leases of no more than five years, but the ports, which will
have to make substantial investments in berths and other infrastructure, need a
15-year timetable to make it work for them.

One industry expert said: “The strike prices have been
set, and the Government wants local content in the supply chain. But the turbine
manufacturers looking at building factories in the UK are being put off by the
length of leases they are being asked to sign.

“If it was a five-year lease that wouldn’t be a
problem, but a 15-year lease is, and if the market does not develop in the way
expected this would add insult to injury.

“While the Government has shown its commitment to
renewable targets up to 2020, there is no visibility beyond then.”

Associated British Ports has agreed to invest
£150m upgrading its port facilities as part of the Siemens deal, although
details of the length of lease agreed between the two parties has not been
released.

Monday, 14 April 2014

MAJOR efforts are underway to reduce costs in the offshore wind sector with the UK Government saying it aims to see a 50% cut in subsidy levels from 2020 onwards.

DONG Energy is the largest player in the European offshore wind sector and Benj Sykes, its operations director for renewables in the UK, believes it can almost halve costs.

He said: “The industry is under increasing pressure from the Government to show it can bring costs down which may explain why a number of schemes have fallen by the wayside in recent months.

“Building a supply chain will help bring costs down. We believe we are capable of bring costs down by 30 to 40% to £100 per MW/h. In fact DONG wants to go further and is looking at 100 Euros per MW/h (or £80 per MW/h).”

Offshore wind subsidies are currently £155 per MW/h, which is three times the wholesale price of electricity, with the costs being passed on through household and business electricity bills.

Sykes added: “We are currently trialling 8MW turbines and these will drive down the costs. The industry needs to earn the right to exist on a large scale.

“There are still uncertainties, but we are pretty confident. If we show as an industry we can get our costs down then the opportunity is there for the taking, but we have to earn the right to grow as an industry.

“We can create a big industry here in the UK for foundation and turbine manufacturers and the supply chain.”

ENDS

For more on offshore wind and the energy sector see: http://www.thejournal.co.uk/authors/Peter_McCusker/

Sunday, 19 January 2014

DURHAM University is currently leading the biggest European-wide project of its kind into the risks associated with fracking for shale oil and gas.
In partnership with other national and international bodies, including Newcastle University, its ReFINE (Researching Fracking in Europe) project aims to create a library of independent research to help inform public awareness of the relative risks associated with the industry.
Its findings are being published in thirteen languages including Arabic, Chinese, Portuguese, Spanish and French.
This research is timely as earlier this week David Cameron said. "We're going all out for shale. It will mean more jobs and opportunities for people, and economic security for our country."
Cameron is keen to see the UK replicate the United States where the shale gas has led to a two-thirds fall in the price of natural gas helping businesses and households slash fuel bills.
The Government wants to see around 40 exploratory UK wells drilled by the end of 2015 – and its commitment has this week seen French oil major Total invest the UK shale industry.
On the other hand last year’s protests in Balcombe, Sussex, indicate the strong feelings of those against further fracking in the UK – and it has been banned in some countries including France.
To date ReFINE has published papers on the risks of water contamination and earthquakes, with further papers coming on well integrity, disposal of fracking fluid and gas emissions.

Earthquakes

Simon Bowens, North East and Yorkshire regional campaign coordinator for Friends of the Earth, said: “We know that fracking can trigger earthquakes. The only test-fracking to date in the UK in Lancashire in early 2011 triggered earthquakes. We need to know more about how it happens.
“But we also need to know about the impacts, not just above ground but also below ground. The Lancashire earthquakes distorted the casing around the fracking well. Such problems can increase the risk of leaks of methane and polluted wastewater, threatening groundwater.”
A spokesman for the United Kingdom Onshore Operators Group (UKOOG), which represents shale gas companies, said: “Once hydraulic fracturing commences, real time seismic monitoring will be used to operate a traffic-light warning protocol under which operations will be halted and pressures immediately reduced if a seismic event of magnitude greater than 0.5 above background seismic activity is detected. This magnitude is well below the energy level that could be felt at the surface.”
Durham University, through its world-renowned Energy Institute, has researched hundreds of thousands of fracking operations and found that the process only caused earth tremors that could be felt on the surface in three places (including Preese Hall, Lancashire in 2011).
Its findings for the ReFINE project say the size and number of felt earthquakes caused by fracking is low compared to other manmade triggers such as mining, geothermal activity or reservoir water storage.
It went on to say the energy released in a fracking event is usually “roughly equivalent to, or even less than, someone jumping off a ladder onto the floor”.
Prof Richard Davies of Durham University, who is leading the ReFINE project, said the claims that the Lancashire earthquake had distorted the well-casing were unproven, saying such incidents are not uncommon.
He said: “The incident in Lancashire was most likely caused by fracking close to an existing fault.
“We are starting two new research projects as part of ReFINE to look into how close to a fault it is safe to drill and which faults in the UK should be avoided because they could shift if fracking occurred near to them.”

Water contamination

The ReFINE research has concluded that it is "incredibly unlikely" that fracking at depths of 2km to 3km below the surface, where most operations take place, would lead to the contamination of the shallow water aquifers which lie above the gas resources.
Bowens said: “Water contamination from fracking is routinely denied by the industry and its supporters, but evidence from the US suggests problems.
“US authorities investigated complaints of polluted groundwater near the town of Pavillion, Wyoming and came to an initial conclusion that this was likely to be the result of fracking – but then decided not to complete the investigation.”
Prof Davies said: “Fracking is not the cause of the contamination. In Pavillion the wells were not cemented effectively. So it’s not the fracking itself but often the other associated operations that need to be focussed on.”
A spokesman for the UKOOG said: “Shale gas formations are typically found much deeper underground than conventional oil and gas sources. In the UK, hydrocarbon extraction will therefore be taking place at a depth sufficiently distant from groundwater to ensure that the possibility of any fractures extending into aquifers is negligible.”

Disposal of Fracking fluid

Fracking operations require between 10 to 40m litres of water (equivalent to between four and 16 Olympic sized swimming pools) although in the major Texas shale plays this is still less than that used by either golf courses, power generators or households.
The fracking fluid is made up of water and sand with 0.5% chemicals. Around one third of this returns to the surface with the shale gas where it can be treated with fresh water on site and used for another well, or transported for treatment and disposal in permitted deep injection wells.
There are more than 50 known chemicals that may be added to the water including acids and nitrates. Such chemicals avert microorganism growth, prevent corrosion of metal pipes, and maintain fluid viscosity.
The remaining water stays underground in the shale formation.
A spokesman for the UKOOG said: “Wastewaters are stored in closed metal tanks before being treated in accordance with strict environmental regulation as used extensively across many industrial processes.
“Wastewaters are considered to be an extractive waste and so are regulated under the Mining Waste Directive. This requires operators to formulate waste management plans that identify how wastes are to be minimised, treated, recovered and dispensed of.”
Bowens said: “There are strong suspicions that many contamination cases have been settled out of court with confidentiality clauses banning homeowners from saying anything. We need independent analysis that cuts through the industry’s weasel words.”
Richard Davies said: “If fracking is ever to be used on a large scale in Europe research must be conducted into effective and efficient ways of dealing with flowback water.”
Flowback water also picks up natural contaminants from underground such as radioactive Radium-226 and the ReFINE project will look at the potential concentrations of these compared to other fossil fuels and the nuclear industry.Air pollution from wells

Bowens said: “Air pollution from fracking wells can pose a health risk, as research from the US again shows. Public Health England recently said that there was a low risk of health impacts, while admitting that there was little evidence. But lack of data doesn’t mean an absence of harm.
“Air emissions don’t just pose health problems. The methane that the fracking aims to produce is a very powerful greenhouse gas. If large amounts of methane escape to the atmosphere rather than being captured, then any claimed climate benefits of gas over coal can be reduced or eliminated. Monitoring in the US shows those levels of these ‘fugitive emissions’ could be significant.”
UKOOG highlight that methane is a natural product of hydrocarbon fields, it contends emissions are not significant and say venting, the process, where gas is burned, will not take place in the UK when a well has started producing.
The ReFINE project highlights there is no existing consensus on the amount of fugitive emissions.

Drilling and completions
One area of keen focus for the ReFINE projects is the integrity of the wells.
Prof Davies says that if the UK shale industry gathers momentum hundreds of wells will be drilled every year.
Durham University has discovered that since onshore drilling began in the UK over a century ago two-thirds of the 2,000-plus drilled wells cannot be found.
Prof Davies said: “Steel corrodes and cement cracks. Once the wells have been completed who will check them? We have an opportunity to up our regulatory regime.”
A spokesman for the UKOOG said: “When all of the oil or natural gas that can be recovered economically from a reservoir has been produced, the land is returned to the way it was before the drilling operations started.
“Wells will be filled with cement and pipes cut off 3 to 6ft below ground level. All surface equipment will be removed and all pads will be filled in with earth or replanted. The land can then be used again by the landowner for other activities, and there will be virtually no signs that a well was once there.”
Bowens concluded: “The UK needs a national debate before deciding whether fracking for shale gas is the answer to the UK’s energy problems. Key to this national debate is accurate, unbiased information and the ReFINE initiative can help provide this. But we need answers to other vital questions, and also critically a Government that hasn’t made its mind up already.”EndsFollow Peter McCusker on twitter @mccusker60

What is Fracking?
Fracking or the hydraulic fracturing of rock – to release its gas or oil - has been taking place in the UK for over 100 years.
The key to the shale gas revolution has been the ability of shale companies to use the horizontal drilling techniques from the oil industry to penetrate shale layers many miles from the drill pad.
Previously a vertical drilling process would have only been able to extract reserves from rocks around 100ft out from the well.
The technique itself uses water, sand and chemicals to break up rock deep underground to release oil and natural gas.

Since 2007 annual energy costs for UK households
have risen from around £950, to £1,250 now, and are expected to rise a further
20% to £1,500 by 2020.

Wholesale energy costs currently account for 45 % of
an average domestic bill – at around £550.

But this is set to change as third party costs, such
as network and transmission costs, supplier costs and green levies, markedly
increase.

Analysis by Norfolk-based industry experts Cornwall
Energy for Journal Energy highlight how third party charges for large
industrial users, such as the Teesside chemical and process industries, have
risen by 50% in the last four years.

And a recent report by one of the ‘big six’ UK
energy companies German-owned RWE npower highlight how these third party
charges for domestic customers are set to rise by over 50% by the end of the
decade.

Two weeks ago the bosses of the big six energy companies
told the Committee on Climate Change green taxes and wholesale prices were
behind recent price rises.

But Stephen Fitzpatrick, managing director of
independent supplier Ovo Energy, highlighted that since that since May 2011
wholesale prices had fallen by 5%. – a claim supported by the Government’s own
figures.

Between 2007 and 2011 the wholesale gas price rose
by 50% as the UK became a net importer due to declining North Sea reserves.

With the US now exporting its shale gas, amid moves
to develop a global spot market for gas, prices are expected to steady or even
fall.

The glut of US shale gas has pushed coal to its
lowest price for many years and led to a surge in the use of coal for power
generation across Europe – although emissions directives mean most of the UK’s
coal-fired power capacity will be closed down in a few years’ time.

RWE npower’s recently published analysis of the UK
energy market ‘Energy Explained’ says it expects wholesale costs to rise by 3%
over the next few years and then fall.

A Navigant Consulting report for the Department of
Energy and Climate Change (DECC) says it expects gas prices to rise by over 10
% in the coming years but could fall by over 10% if a UK shale gas industry
develops.

By the end of the decade RWE npower believes
wholesale energy prices will have fallen to £514 or 35% of the domestic energy
bill.

But third party costs are set to rise substantially
in the coming years. These can be broken down into three categories:

It shows margins steady at 5% over the last two
years following a period in 2011 when most of the big six made a loss of £5 per
domestic customer. This followed a major spike in the price of gas.

A spokeswoman for RWE npower said: “We have gone
from making a loss of £5 per customer to a profit of £59 per customer.

“It is not sustainable to keep making a loss, and a
return of 4% to 5% is reasonable in this industry. Our operating costs have
increased and we have introduced huge efficiency programmes around the country
to reduce costs.”

Suppliers incur costs from billing, sales, customer
service and all the other activities that make up a retail business. These plus
profit margins of 5% account for up to 20% of a domestic bill.

Network
and transmission costs

Npower’s Energy Explained report says Network and
transmission costs currently 23% of bills at £289 and this is set to rise to
£403 or 27% by 2020.

These include the cost of building, maintaining and
operating the local gas pipes and electricity wires, which deliver energy to
homes and businesses.

Ofgem sets price controls, which limit the total
amount of revenue that gas and electricity network companies can earn.

It estimates that the network and transmission
companies such as the National Grid and Northern Powergrid, the electricity
distribution network operator for the North East and Yorkshire will need to
invest over £30 billion in the next decade.

This will upgrade and renew Britain’s gas and
electricity networks, connect new sources of energy generation and increase
security of supply.

A large proportion of this is a forecast increase in
gas costs which will arise from having to run the national gas network with
less gas.

Green
Levies

The final element is policy and regulation costs –
which are mainly green levies aimed at combating climate change.

These are set to rise from £185 to £329 – from 15 %
to 22% - between now and 2020, says the npower report.

Although DECC says the 2020 will be reduced to
£1,331 through the impact of some of its domestic energy efficiency schemes.

The Government has a target of ensuring 15% of the
UK energy comes from renewable sources by 2020 and to do this it has identified
securing 30% of electricity from low carbon generation by that date.

Green levies include the Renewable Obligation scheme
which will be replaced by strike prices for low carbon energy sources under the
Contract for Difference element of the Energy Bill, which is currently passing
through parliament.

They also include the carbon floor price green deal
and Energy Company Obligation (ECO) which shifts the burden for domestic energy
efficiency schemes onto the energy suppliers.

Janusz Bialek, DONG professor of renewable energy at
Durham and a world-leading expert in energy infrastructure, believes network
and green costs will continue to rise.

“The network is old and needs replacing and there
are substantial costs associated with incorporating renewable energy into the
grid.”

Despite MPs wanting to encourage new entrants Bialek
believes the UK market is a competitive one.

“The energy companies are not making much of a
profit and have gone into the negative. Ofgem agrees the profits are not
excessive.

“What we really need is people to understand their
energy bills more clearly,” he said.

He said: “The wholesale energy cost component in
Berlin is only 33% of total final bills, and while German wholesale prices are
among the lowest in Europe, end user retail bills are among the highest because
of rising energy taxes.

“This demonstrates that the cost of energy
transition is going to be high even when you have a huge coal/lignite fleet of
power stations to keep wholesale prices low.

“The UK does not have such a huge coal fleet, indeed
most of the time the wholesale price reflects the expensive natural gas prices.

“There is no prospect of new coal plant in the
UK. More gas capacity is the short term
fix, but this will require capacity payments and is not a cheap option.

“The government’s £92/MWh strike price for nuclear
in 2023 gives an idea of where DECC thinks power prices are going.”

James Beard, a spokesperson for the Renewable Energy
Association, said: “Importing gas from Russia and the Middle East has become
increasingly expensive over the last decade, and this is the main element
driving up our energy bills.

“More home-grown renewable energy means less
exposure to international gas markets, as well as jobs, investments and tax
revenues here in the UK.

“Reducing support for renewables would be a huge
mistake from an economic, as well as environmental perspective.

“Renewables and energy efficiency are both vital for
preserving a safe environment for future generations, and it is right that they
receive public investment.

“But if there is a case that the funding for these
programmes can be raised in a more equitable way than at present, then we are
willing to engage with that debate – provided any new measures do not undermine
the jobs and investments our industry is delivering for UK plc.”

With energy costs now a matter of overriding public
concern the Labour Party wants to freeze bills for 20 months, while the
Coalition’s is looking to cut green levies.

Labour leader Ed Miliband was energy secretary when
most of the legislation mapping out the UK’s green energy transition was
implemented.

Most commentators say Labour’s price freeze plans
are deterring investment in the sector and will lead to price increases, either
before or after its implementation. If the wholesale gas price falls, as some
suggest, it may even result in windfall profits.

The most likely short-term measure, which could be
announced in Chancellor George Osborne autumn statement next month, will shift
the cost of the ECO – a levy of around £70 per domestic customer – on to
general taxation.

There is also some discussion of bringing in
measures to alleviate the costs incurred by the carbon floor price.

Introduced earlier this year, it punishes large
industrial users and power generators for emitting carbon dioxide and is set to
cost business millions of pounds.

But third party costs, many of which are locked in
by statute and international conventions, will only fall if the politicians row
back from the UK’s green energy commitments.

Several EU member states - Spain, Italy, Greece -
have already reduced or even abolished support schemes for renewable energy,
while others - Poland, Germany, France - are currently reviewing their support schemes,
with an aim to relieve the burden on energy consumer bills.